Loyalty

Consider this list of companies. Pay attention to them.

• Microsoft
• Apple
• Starbucks 
• Coca Cola

What is common among them?

They are global companies to whom people are loyal. The loyalty and trust span over countries and millions of people. Most of the people are aware of these brands, even if they are not active customers, because of the loyalty and trust the organisation has built overtime.

Loyalty is an elusive word. One may be familiar with it in personal relationships but where does it fit in the Entrepreneurial equation? What does it mean when a customer is loyal to the business?

So let’s start with the meaning of Loyalty and then make our way forward. 

What is Loyalty? 

Loyalty is a feeling of support and trust an individual or a group has towards something or someone. Loyalty, ultimately, is having faith through thick and thin. This can range from supporting a team on sidelines or being a soldier on the frontline. 

Since we’re talking in the context of businesses, this feeling is towards an organisation or a brand. If on the individual level it can have so much impact, imagine an organisation having such support. That’s why Microsoft is the number one company with the highest Market share of 3.34 billion dollars in 2024. Apple just trailing behind with 3.16 billion dollars market capital. 

There are many factors playing into the equation but the most crucial aspect is trust of customers. With customers buying Apple products after every new release, even though there are no significant differences in their newer models, shows the power of loyalty.   

What is Customer Loyalty specifically?

Customer loyalty is an emotional bond between a customer and a business. The experiences of the customer dictates the kind of emotional bond a customer has. It might sound a bit weird that customers can have bonds with large organisations. But as humans we always associate things with how we feel. A business or the product/service/experience representing a business is no different. 

If the overall experience of the customer is positive, there will be positive emotions associated with the business. This leads to a person recommending the business to others, buying products from the brand repeatedly and trusting the advice the business gives or embodies.

If the customer sees the business in a bad light then there’s no emotional bond or worse, negative association to the business. The person might demotivate others to not buy from the brand which not only hurts the goodwill of the business, but also portrays the brand negatively.

So what is the importance of loyal customers to the business? 

There are kinds of customers like impulse customers, Discount customers, Need-based customers and wandering customers according to this article by the Corporate Finance Institute.

Loyal customers, however, make up a small portion of the customer base but they end up generating the most sales revenue. They show their loyalty to the company by raising goodwill and revenue. They seek out the specific products/services, and advise non-customers to buy from the business.

That’s the kind of influence a loyal customer base can have. A business must always try to win the loyalty of customers which is long-lasting. Short-term get rich tactics are plenty but nothing can win over loyalty like being reliable and consistent in one’s promises.

We’ve talked about how customers benefit the business. Now let’s shine the spotlight on the businesses. Let’s move forward with a business centric viewpoint, where all this fits in the process and the measures a business should take to earn customer loyalty. 

So where does customer loyalty lie in the Customer Life-cycle?

The Customer Life-cycle goes something like this:

• Reach
• Acquisition
• Conversion
• Retention
• Loyalty 

With this Customer Life-cycle in mind, Customer loyalty is the ultimate end-goal. Once a customer’s loyalty and trust is earned, that customer becomes an active advocate of the business. But the relationship is not one and done. It has to be valued by the business first, to receive value from the customer. After loyalty is achieved, continuous measures must be taken to retain the customer, which we’ll focus on next. 

Customer Retention

Customer retention can be defined as a unit of value or metric by which one can gauge customer loyalty overtime. Customer retention rate is a quantitative measure which can show how many customers are retained in a specific amount of time. It’s also called a ‘churn rate’.

If the Churn rate is high, the business is churning away more customers. If the churn rate is low, the business is retaining more customers in a specific time frame

The Churn rate formula is =   

Lost Customer  x 100

         Total customers 

Why is this metric important? 

This value is an indicator of some of the key functions of a business. If the churn rate is low it clearly shows that the product/service, the after-sales services, customer support and customer experience are of elite quality. This shows that the business is customer-centric.

Such a business develops a good reputation and earns the trust of consumers.

Only such businesses survive and thrive in a market saturated by a variety of similar services. 

Customer Retention Strategies

• Efficient Customer Service 

This point seems like the most obvious when we talk about customer retention strategies. No Product/service is infallible, that’s why customer support is a major function in most businesses.

According to this Zendesk report, 80% of the customers would rather do business with a competitor after persistent bad experiences from the business end. This data is a clear indication that customer support efficiency clearly impacts all the progress made by marketing and sales negatively.  

A Salesforce research data indicates that 78% of consumers are willing to overlook mistakes if the customer service was impeccable.

There’s a need to reiterate how important customer service is in a world where personal touch is losing out and digital media is taking over.

• Personalise Customer Experience

In this digital world, everything is driven by data. Data is currency. So when businesses want to enhance their functions and reliability, data plays a crucial role. One way to enhance functioning is to personalise the experiences of customers.

We all know that people gravitate towards things that can make their lives easier. By refining the available data and tailoring it to suit customer experiences will definitely bring results in the form of engagement and interest. 

Tailoring specific ads to depend upon their previous interests and engagement, sending personalised emails which aren’t AI generated, building relations with customers by reaching out, and keeping in touch. 

Customer support teams should develop into Relationship building teams, meaning that a customer knows who to be in touch with if they run into a problem. The peace of mind created by your business in the customer’s life will prove invaluable on both ends. 

• Building Loyalty Programs

Building a loyalty program seems easy but carrying out an effective loyalty program is no child’s play. There must be a strategy involved in releasing loyalty programs. That’s where data comes in. Constantly personalise customer experience and tailor loyalty programs accordingly. Loyalty programs should also have some variety. 

There are different types of customers who should be targeted with different kinds of loyalty programs. There are dormant customers, active customers, impulse customers, discount customers and so many more. 

So for example, a dormant customer could be incentivised with discount coupons to take action; while an active customer can be incentivised with free goodies an impulse customer can be provided with a limited time offer. 

So, understanding customer behaviour and then taking action is the wisest step. No business starts off the most efficient, as the journey progresses, as the data piles on, the refinement process should be started promptly. 

• Utilise Feedback

There are different sources of feedback and customer feedback is the most important of them all. Why? Because customers are the end consumers. They are the ultimate users of the product/service. So listening to them proactively actually clears out a lot of problems faced by businesses. Maybe your business has hit a plateau on the sales front. One of the things you can do is reach out to customers and ask for feedback. There are many ways to reach out to a customer. 

You can run a feedback form, utilise telephonic interviews to gather feedback, invite customers to a forum and interact with them digitally to get them to share their experiences or you can pay attention to online reviews. 

You can categorise the feedback data and see to which department the result concerns ultimately. This way there’s a clear roadmap to arrive at the root of the issue and initiate problem solving. 

How do customer loyalty and retention work together?

While Loyalty and Retention are different, they work together to keep the customer satisfied and the business thriving. When Customer retention rate goes up, we can be assured that customers feel more loyal towards the business. Customer Retention rate provides a clear-cut measure while Loyalty shows up in many ways.

Loyalty can manifest in different ways. You may see positive online ratings and reviews increase, growing interest in the brand, sales numbers see steady growth. Loyalty and retention are representations of each other. If there’s more effort in retention, the number of loyal customers climb up. Loyalty can seem elusive, but retention strategies are based on practical steps one can take. 

Earning Customer Loyalty is still Relevant

The digital age has created a significant gap between the consumer and the brand. Businesses have to work harder and make themselves stand out to make an impression on the minds of the consumer. One kind of product or service is offered by many businesses. Why should a customer buy your particular product when there’s a wide array of choices available? 

Now the question arises, How can a business convince a customer to buy their specific product? Here’s a reality check, customers are not just buying your products, they also buy the consecutive experiences that follow. And if they don’t get their money’s worth or something to stick around for, then they cannot be retained.

Businesses get confused between data and human beings. Data is just a static number while the customers are not. So it’s more important than ever to make sure customers are treated like people and not data. By doing that this world can grow more humane and warm, where the personal touch is fading away. 

Conclusion 

Customers can become valuable, when they’re valued by the businesses first.

By looking at customers as an opportunity to serve, we raise their value as well as walk on a path of transparency. There is tremendous power in the way we approach the world. Maybe fixing our approach can fix many of our problems. 

This blog was a small effort in helping entrepreneurs to take a step towards loyalty towards their customers.

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